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Mayors of the 14 municipalities that invested funds meant for service delivery with VBS Mutual Bank, will be summoned to appear before the Portfolio Committee on Cooperative Governance and Traditional Affairs (CoGTA) to explain how did they allow such investments which are in violation of several laws that include the Municipal Finance Management Act and the Municipal Investment Regulations.

The committee today received a briefing from the Minister of CoGTA, Dr Zweli Mkhize, on the financial and service delivery performance of the municipalities that invested with VBS.

The municipalities from Limpopo, North West and Gauteng jointly invested more than R1.5 billion with the bank and it is not clear if the funds, which were meant for service delivery, will ever be recovered after the bank was put under curatorship by the South African Reserve Bank, following massive fraud by VBS directors and shareholders.

The Chairperson of CoGTA, Mr Richard Mdakane, said it would be very unusual for municipalities to invest public funds without the knowledge of the mayors or approval by municipal councils.

Committee members also found it hard to believe reports that most mayors of the involved municipalities have stated that they were not aware of what was going on with the VBS investments.

“The mayors must account for these investments that were clearly unlawful, it would be very rare for a decision to invest municipal funds to be taken without council knowing about that, under normal circumstances it doesn’t happen,” said Mr Mdakane.

The committee welcomed the report by Dr Mkhize on the VBS Bank and the challenges, broadly around the local government issues and the state of local government in our country. The committee also supported Dr Mkhize when he said legal steps will have to be taken to deal with those who were involved in this heist and to try to recover the funds.

“The law agencies must be allowed to do their work and on our side politically, we are going to call those responsible for this to appear before the committee – mayors and other people who were responsible – because they were warned that it was wrong for them to do so but they went ahead and deposited the money, therefore surely they knew what they were doing, and they must be able then to account for their actions,” Mr Mdakane explained.

Dr Mkhize said the department had meetings with all the affected municipalities and resolutions taken include budget restructuring, development of recovery plans to ensure that the municipalities remain financially stable and continue to provide sustainable service delivery.

The affected provincial departments have instituted forensic investigations in accordance with section 106 of the Municipal Systems Act.

Dr Mkhize told the committee that the municipalities are currently facing financial and service delivery difficulties as a result of the investments with VBS. This has resulted in the delaying or suspension of municipal projects and failure to pay creditors within 30 days as required by law.

Members of the committee have called on Dr Mkhize to make sure everything possible was done to recover the missing funds.

“Whatever monies can still be recovered must be chased – whether assets or cash – it must be recovered, even if it’s R100 million,” said committee member Mr Xolani Ngwezi.

“We cannot allow public funds to disappear quietly, we are going to pursue these funds up to the last cent, we will make sure the money is recovered,” said Dr Mkhize.

By Sakhile Mokoena

23 October 2018